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An obscure county appeals panel balked at granting Los Angeles developer Rick Caruso a property tax break worth $200,000 a year, with members of the real estate Assessment Appeals Board claiming they’d been given too little information to decide and found the information they had been given too confusing.

Typically, the procedure under deliberation would have been a slam dunk, but Caruso — a controversial figure given his role with Montecito’s much beleaguered Miramar Hotel — was seeking to achieve a $24 million reduction in the assessed value of the six parcels comprising the Miramar, and an item that would otherwise have been rubber-stamped got put on hold this Thursday for another month.

If that reduction in appraised value is approved, that means Caruso will pay roughly $300,000 a year in property taxes rather than the half a million he now pays. Given the stakes involved, it was striking that no one representing Caruso appeared at the hearing, held in the County Board of Supervisors room early Thursday morning. Equally striking, the number of reporters covering the hearing — three — outnumbered the number of appeals board panelists — two. (Typically, the panel consists of three voting members.)

Two years ago, Caruso had applied for a dramatic reduction in his assessed real estate value, arguing that the recent recession had reduced what his waterfront property was worth from $51 million to $5 million. But even with the market crash, county assessors insisted the property was worth far more than that. After a lengthy — if mysterious and confidential — process, they concluded the market value of the Miramar’s land and blighted cabins, combined, was $30 million. Caruso agreed, and this Thursday the appeals panel was asked to ratify a stipulated agreement between Caruso and the county to that effect.

Boardmember Donald Rowland objected on arcane legal and procedural grounds. Boardmember Jana Zimmer objected because she hadn’t been allowed to see the report justifying the $21 million reduction in value. That report is not available to the public because it contains proprietary information but is available to boardmembers. Zimmer questioned how it was Caruso justified the $5 million he initially said his property was worth. Under her questioning, staff members working for the county assessor acknowledged he provided no data to justify that number and suggested that he had released it merely as a starting point for discussion. Zimmer found that questionable. “They just threw down that number under penalty of perjury?” she asked. Likewise, she noted that $30 million seemed like a good midway point between $5 million and $50 million. “It kind of looks like this has been cut down the middle,” she said.

Melissa Bonilla of the assessor’s office denied that suggestion. The estimate, she said, was reached by examining the 100-page document Caruso released a few years ago when seeking new investors. Based on that and a thorough assessment of the luxury hotel market, Bonilla said $30.7 million was the most the Miramar could be valued at and still be a financially feasible project. While the specifics remain proprietary, Bonilla said, she factored in the cost of construction, the likely room, and the rate of return for the investors. She declined to elaborate what rate of return she used in making her determination.

Zimmer was clearly bothered that such a big ticket item involving someone as controversial as Caruso would be placed on the consent agenda. Unless called out by individual boardmembers, consent agenda items are voted upon with no discussion or debate. Zimmer wondered whether neighbors of the Miramar — vocal in their anger about the hotel’s visual blight — could get their property values reappraised based on “the stigma” and “external obsolescence” — terms of art in property appraisal — caused by the Miramar. If they submitted applications, she was told, they would be considered.

Boardmember Rowland said the stipulated agreement should be withdrawn because the ownership structure of the Miramar has changed since it was first submitted. Initially, Caruso owned only 10 percent of the Miramar; now he owns 100 percent. Because of this, he argued, new owners could not pursue the stipulated agreement sought by the previous ownership. Instead, he noted, Caruso could obtain the reappraisal he sought via other means. When ownership changes by more than 50 percent, reappraisals are automatic and no stipulated agreement need be entered.

Compounding confusion surrounding the proposed deal was Caruso’s request for a multiyear waiver of future bed taxes worth $18 million. This deal, intensely controversial in some quarters, was justified on the grounds that it would make it easier for Caruso to attract the investors needed to knock down the run-down hotel cabins and rebuild the Miramar. What the county would lose in bed taxes, Caruso — and County Auditor Bob Geis — argued, it would more than make up for with additional property taxes and sales taxes. But if the baseline were reduced for calculating property taxes, wouldn’t that have a bearing on how attractive — or not — the bed tax waiver was?

As Zimmer said more than once, “I’m confused.” On this, neither Bonilla, nor her boss, Lisa Hammock, had a ready answer.

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Comments

The Miramar was always kind of tacky in a way with the freeway and the train tracks (Train horns day and night) right there.They should have just left it open and kept the revenue flowing. Ten years gone.nothing but closed empty buildings. no restaurant,no bar no beach club.no hotel . no jobs no anything.

I loved the funky old Miramar, but that being said the carpets stank and it really needed a major facelift. The neighbors and local powers have made life very difficult for those who have sought to renovate the property, and share blame for the current blight. Ty Warner was first to try to renovate, and he walked away disgusted with the process in 2007, after 5 years of fruitless efforts and neighbor enmity. (He was smart enough to get out before the crash.) Maybe the community should have cooperated with Ty Warner a little bit, and we wouldn't now be left to deal with Caruso, who is slippery as an eel.

The valuation should be based on the highest best use and that might not be a hotel, but a series of high end townhouses and houses such as the gated development across San Ysidro where Biden was entertained.

First off the Assessment Appeals Board is not arcane in any manner it is a useful means of getting property tax issues resolved. My office deals with various City/County Assessment Appeals Boards throughout the State of CA. Second the Miramar should be paying its fair share of bed tax, but if that is the case then the other establishments currently and in the future should not have as well, and should have to pay its fair share of property tax, they are not a not-for profit organization and would never qualify under that rule from the Board of Equalization. Third it was Caruso's responsibility as an owner to notify the County Assessor of the change of ownership and change is valuation of cost. Fourth both Caruso and Assessor office need to have more transparency on the matter to the general public on how they came to their numbers, let's see the formula they used and does their argument hold any validity. Finally if Caruso can't be honest with the Montecito and Santa Barbara communities and County then he needs to either sell to another party or back to the County and allow the County to either turn the area into a great park for families to come and enjoy the seaside and what Santa Barbara is known of "it's hospitality" or allow it to be sold at auction with proposals and permits in place of the use of the land at time of sale

perhaps some affordable housing and a light rail station/bus hub would be more appropriate this location. the needs of the present are not always what will be seen as appropriate 500 years from now. If we look to the future we may see that economical ways of solving transportation problems are at hand but are not considered until it is far too late. More housing will absolutely be needed,and will eventually be built,but not until a lot of lessons are learned and total gridlock is an all day, every day scenario. Think now towards the distant future and the not so distant prospect of a California with 50 or 100 million persons. We can begin to plan for this now ,or wait and be left with expensive hotels that serve only rich tourists.

What's with the emphasis on the "I'm confused" statements attributed to Jana Zimmer? She's practiced law in the real estate area for years, both in the private and public sectors, and I suspect the tone of her comments reflected her frustration over the lack of facts upon which to base an opinion, for or against, rather than a scatterbrained inability to make a decision. The panel's refusal to rubberstamp a deal that fails to pass the smell test is admirable: the system works. The matter was only continued, so Mr. Caruso's opportunity to show cause for the reassessment was preserved: the system is fair.

I agree, zauche, the article starts with the word "obscure," which sets the tone as one of confusion. Zimmer did not seem confused by the facts, only by the incompleteness of the information presented--or by the fact that her consent was a foregone conclusion. I can see why they had it continued. We're dealing with a big-time assessment of a unique property.

It was not Ty Warner who closed the Miramar and gutted it. That pleasure belonged to Ian Schrager, of Studio 54 fame. He was the one who treated it, the neighbors, and our whole community with such disrespect. Warner picked it up when Scrhager bailed due to declines in his international empire of hotels for the .01%.

I'm surprised to see that the property is assessed on what value will make it "financially feasible" for investors. Seems odd to me that "return" would factor in, having seen how the city and county don't ever seem to hesitate to pile enormous roadblocks in front of commercial projects, making such investment impossible for all but the biggest players, ensuring that whatever is unique or funky will eventually rot away into a sea of monotonous beige stucco. If the Miramar had kept operating, it would have been grandfathered in, but Schrager had no interest in grandfathers or anything snug or sentimental at all. So now we have a ruin in a complicated location that no one can afford to develop.

fmrlobbyist nailed it. What sort of precedent does this set for other projects, neighbors, etc who want cheaper taxes, breaks or loopholes installed in their property taxes? Montecito, you should have stuck with Ty or hoped Fess would have jumped in. Instead you have an out of town developer trying to nickle and dime you to death and a bunch of neighbors chomping at the bit just to "improve" the property. Just wait till it is improved and the traffic turns into the Camino Real Market place all over again out in Montecito. There is a reason this guy is successful. Because he throws $5million down as what he perceives as a taxable value on a $51million dollar property that he paid for. Brilliant! Any of you ever watch the Hardcore Pawn?

This is a great example of what happens when government rapes and pillages. Obviously that isn't the best spot for a high-end high-revenue generating hotel because the train tracks are less than 10 feet away. There isn't a lot of room for parking, so you can't fit a lot of people in there. So how do you make money when you can't attract the very high-end clientele that spend huge amounts of money, and you can't attract a large amount of medium-end clientele due to space limitations? Well, you either sell it and turn it into houses or condos, or there isn't much else you can do when the government is putting up all sorts of financial and building roadblocks except sell it for a lower price so property taxes come down and maybe the next owner can do something with it.

I think there is also a lot of potential for a more economical beachside get-away, maybe with a restaurant or two right on the ocean. The government would have to get out of the way and let them operate, and keep their property taxes down, otherwise it is just going to sit for another 10 or 20 years.

So, loonpt, you correctly point to fundamental problems inherent to the site: trains, freeway noise and no room for parking. Then you say government is putting up "all sorts of .... roadblocks". Doesn't make sense. This is, fundamentally, not a site for a resort motel, high-end or not.